NebuAd mess leads big ISPs to call for “opt-in” ad targeting

AT&T, Verizon, and Time Warner Cable all told the Senate Commerce Committee …

At a hearing before the Senate Commerce Committee Thursday, three of the nation's largest ISPs committed to an opt-in approach to using ISP data for behavioral advertising. AT&T, Time Warner, and Verizon all stressed that they were not currently using any NebuAd style ad targeting systems, and said that if they chose to do so, "affirmative consent" from consumers would be required.

That's an important change from the ISPs that conducted trials with NebuAd gear earlier this year and were subsequently hauled before Congress to talk about it. Each of those ISPs relied on an opt-out mechanism that never quite made sense in light of the frequent assertion that "consumers will love our new ad-serving technology that tracks where they surf because it brings them more targeted ads!" If true, why did the companies involved make the mechanisms opt-out?

This was the sort of question posed by some tough letters from Congress over the summer, and the heat got so intense that the ISPs in question have all stopped their trials. NebuAd lost its CEO and now says that it hopes to pursue more traditional forms of advertising (though other companies, including the UK-based Phorm, are still attempting to gain traction in the US market).

At today's Senate hearing, AT&T, Verizon, and Time Warner all showed an interest in developing an industry consensus on behavioral targeting that includes affirmative (opt-in) consent from consumers. They would like to see this adopted by all behavioral targeters, though, including ad agencies and search engines, so that ISPs aren't at a disadvantage in the market. Good luck with that.

TimeWarner Cable chief strategy officer Peter Stern testifies

Even if search engines and ad networks refuse to adopt the opt-in targeting model, though, the new commitment to "transparency," "consumer control," "privacy protection," and "consumer value" (as AT&T put it) is welcome. It may also turn out to be good for the entire Internet advertising sector, as well.

The Federal Trade Commission (FTC) has held a long debate on the issue of behavioral targeting and currently believes that voluntary self-regulation (PDF) based on some key principles is the best way to proceed. Industry couldn't agree more, but the flurry of hearings on the issue this year (most spurred by NebuAd's approach) suggest that lawmakers could be prodded into action.

The new proposals may be a way to stave off such new lawmaking, but that doesn't make them a bad idea. In fact, the entire process this year looks like an excellent example of how government oversight can curtail dodgy market practices and aid consumers without resorting to the less-subtle (and often less flexible) +5 Legislative Mace of Doom.

The whole proceeding is reminiscent of the current government approach to network neutrality, as well—don't pass a bill, don't pass detailed FCC regulations, but lay out some general principles and make it clear to companies when they cross an unacceptable line.